Russia energy

Running into trouble over energy, again

The Vienna-based Energy Community, which seeks to extend the EU single-energy market to south-east Europe, has criticised Serbia for its gas delivery agreement with Gazprom, Russia's state-owned gas monopoly.

Analysis

This is not the first time that the Energy Community has taken Serbia to task over the country's energy ties with Russia. In March 2016 the issue was the unbundling of Srbijagas, the Serbian gas monopoly, which controls the production, import and distribution of gas in the country. The EU body threatened to impose sanctions on Srbijagas if the firm's roles were not unbundled by July 1st 2016. There has been no progress on unbundling, and in December the Serbian authorities said that they were aiming for a complete physical unbundling by the end of 2017.

The Gazprom problem concerns the 2012 agreement between Serbia and Russia, Article 4 of which specifies that the gas is for use on the Serbian market. The Energy Community says that this is a destination clause, which is against Energy Community rules. Following several informal alerts the Secretariat sent an open letter triggering a so-called preliminary procedure, which gives Serbia's government two months to respond; the Secretariat will then prepare a dossier on the Serbian-Russian agreement.

Serbia's minister of mining and energy, Aleksandar Antic, says that his ministry will draft a reply by the deadline. The EU has been fighting a drawn-out battle with Gazprom over destination clauses in the firm's agreements, particularly with east-European countries, but a resolution of that dispute seems to have moved closer. On December 27th Gazprom filed proposals with the European Commission aimed at resolving the five-year dispute over its alleged monopoly practices.

Srbijagas has a long history of working with Gazprom, and its chief executive officer, Dusan Bajatovic, has close personal links with Gazprom's top management. If Gazprom digs in its heels, it is likely to find an ally in Srbijagas. On the other hand, with the international market in gas still soft, the Russian side might decide that it is not worth making a fuss about a market that accounts for a small fraction of its total exports, especially as it closes in on a broader deal with the EU.

Impact on the forecast

The government is being co-operative in trying to resolve the current issue, but its energy relations with Russia will continue to cause difficulties with the EU authorities.